On Fast Track to the Future

High-speed trains will continue to resurrect Europe's rail system, says the chairman of France's state operator

By

William Lyons

Updated March 14, 2011 12:01 a.m. ET

London—Guillaume Pépy has a secret. The chairman and chief executive of Europe's largest high-speed train operator, likes to fly. "It's true," he chuckles. "I'm very fond of aircraft, so you could say I missed my ideal career completely."

Not that Mr. Pépy, who has run France's national state-owned railway company, Société Nationale des Chemins de Fer, or SNCF, for the past three years, gets to fly much these days. One of the last times he went on an airplane was to take a flight from London City airport to Charles de Gaulle in Paris. It was, he says, a fact-finding mission to check the level of service. Shaking his head he smiles: "I wasn't impressed."

It's been 23 years since he joined SNCF as an énarque, a graduate of the prestigious École nationale d'administration, a postgraduate training house for senior civil servants, but few would forgive him a career change now. The past two years have seen a slew of issues cross his desk from complaints about service and overcrowding on regional routes in France, through disputes with the work force over pension reform and a diktat from France's President Nicolas Sarkozy to all major industries in state hands to increase capital expenditure. This amid a period of falling revenue and having to make a very public apology for the role SNCF played in transporting Jews during the Holocaust.

All of this has been played out against a backdrop of one of the most radical changes to European railways in a generation: the opening up of cross-border rail transport to competition, a measure that pits SNCF against Germany's largest rail operator, Deutsche Bahn, for dominance of Europe's high-speed rail traffic.

ENLARGE

Guillaiume Pépy says Europe is 'completely convinced' that high-speed trains are the future. 'I feel reinforced by the fact that China has made exactly the same choice,' he adds.
Reuters

But ever the optimist, sitting in London where Mr. Pépy is visiting for a series of meetings, he refuses to be downcast. In fact with revenues at SNCF in 2010 up more than 30% to €30.5 billion ($42.4 billion) and growth in the network for high-speed rail, he appears genuinely excited by it all.

"When I came into the industry in 1988, except for one or two high-speed lines, it was a declining industry," he says. "Regional traffic was poor, the freight system was disintegrating and the networks were getting older and older. Within two decades we have completely reversed the situation and now there is a widespread feeling that the train is the future of travel within Europe."

Not only is train travel often faster than plane travel, he argues, but he also puts the case that it is more environmentally friendly. With domestic borders coming down across Europe's railroads, he says there is an opportunity to challenge the Continent's low-cost airlines. Initiatives such as Railteam, a joint marketing and ticketing operation with an alliance of train operators including Deutsche Bahn, allow passengers via one website to book high-speed rail tickets on networks across Europe.

"Competition is exciting," he says. "We come from a world of domestic monopolies and for years we spoke about competition but we didn't have it. Now it is here. It is a radical change, I think it's a very good step as it will increase return to the taxpayers who over the years have invested a lot in the infrastructure of the networks and it is good for customers as they will have a wider range of services."

It also means he can grow his flagship service, the Trains à Grande Vitesse (TGV), and realize his dream of high-speed rail running seamlessly across Europe.

Scattered in front of him are a series of maps. This year marks the 30th anniversary of the first high-speed train in France. Since the launch of the first TGV line between Paris and Lyon in 1981, the trains have carried more than 1.5 billion passengers with lines spreading across France. At the end of this year, Mr. Pépy says, the TGV will open a line linking Lyon in central France with Mulhouse near the German border, gateway to the eastward expansion of the European Union. The maps show the present high-speed rail links in Europe and in red the lines under construction. It is these lines, he says, that will challenge the dominance of air carriers on routes such as London to Paris.

"Europe is completely convinced that high-speed is our future," he says pointing to the high-speed routes on the map. "I feel reinforced by the fact that China has made exactly the same choice. It had a choice between developing airlines and a high-speed rail system and it has chosen rail.

"When you have good long distance high-speed trains you do not need a low cost airline. The chairman of Air France has always stated that in France the low cost airline is the TGV.

"Now look across Europe. Spain is highly dedicated to high-speed rail; France also; within the next three or four years Italy will have almost finished its program. Germany is still working on theirs, I would say between 50 and 60% of the European network is built, but of course there is more to be done."

Those red lines are not as prevalent on the map of the U.K. where there is only one high-speed line between London and the southeast England port city of Dover. Plans to build a second linking London to the West Midlands and later Scotland have been mired in controversy. Last week, 21 high-profile businessmen including Nigel Lawson, a former chancellor of the exchequer, wrote a public letter condemning the project as a waste of money and a "vanity project."

But Mr. Pépy has a great deal of respect for high-speed rail in the U.K., limited as it is. "High Speed 1 [the London-Dover route] is one of the most efficient in Europe," he says. "It is the most reliable and has a high level of punctuality. So it is a very good advert for high-speed rail."

He says he hasn't followed the U.K. debate closely, but argues that any decision has to be made within the wider framework of public infrastructure investment. Whether it is building roads or airports, the long-term costs and benefits have to be compared. How this is financed, he argues, is largely down to culture, but he sees a natural correlation between public ownership and infrastructure.

"High-speed rail is all about the long-term. When you build a high-speed track you build it for 70 years. That is the choice Spain, China and now Russia have made."

Competition has allowed him to expand SNCF internationally. In 2008, SNCF acquired a stake in Nuovo Trasporto Viaggiatori. It will be Europe's first private high-speed train company that will operate a fleet of 25 trains across Italy.

Then there are opportunities for the TGV outside of Europe. SNCF has sold high-speed rail infrastructure and expertise to Korea and Morocco. Mr. Pépy says there are prospects in Russia, Saudi Arabia and California as part of U.S. President Barack Obama's proposed $53 billion high-speed rail plan. He is also looking to grow the freight-forwarding business, moving it more closely into transportation systems for high-value goods.

This summer a joint British and French intergovernmental commission will make a ruling as which rail operators can operate under the 31.4 mile Channel Tunnel. It is a move that could see trains, manufactured by German rival Siemens, operate in the tunnel.

"At the moment we compete with Deutsche Bahn on Brussels to Cologne and [maybe] tomorrow London to Brussels. Competition in the tunnel is coming, it is enshrined in European law and as shareholders of Eurostar [the high speed train company that operates between the U.K. and Europe] we have been preparing for competition for years, and it will benefit everybody."

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